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Second-Hand Self-Storage

What is a good deal? More important, what is a good deal for you? Just because the numbers work for someone else does not mean the property is an ideal investment.

For stabilized properties, you need to meet your projected rate of return. For a value-add property, things get more complicated. Here are some examples of investment strategies that can be implemented:

Property with a high occupancy that has not raised rents. Acquire the facility and raise rental rates across the board to equal market rates. You may lose some tenants, but overall revenue numbers should be substantially higher.

High-occupancy facility with room for expansion. Buy it and plan to expand. Consider adding units in phases to reduce out-of-pocket expenses associated with expansion.

Low-occupancy facility. Acquire the property and increase the advertising budget to amp up promotions. Ideally, you want to be the first facility people call for storage.

Older, somewhat rundown property. Many sites just need to be spruced up: Paint buildings, reseal parking lots and driveways, and put up new signage. A clean, fresh-looking site will attract tenants who place a premium on storing belongings in a nice, safe-looking facility. Often, they’re willing to pay more for it.

Look at your buying options cautiously and creatively. Sometimes it doesn’t take much to improve a facility’s appearance and income stream. Regardless, don’t buy a self-storage property unless the price is right and you can meet your own predetermined benchmarks through the purchase. A successful investment career is ahead of you if you can do both.